Lowest Office Vacancy Rate In London For 2 Years
29 Jun, 2005, London
The office vacancy rate in Central London is now at its lowest for two years according to the mid-year statistics produced by global real estate advisor Cushman & Wakefield Healey & Baker (C&W/H&B).
The vacancy rate is an important barometer of the strength of the London office market which itself reflects economic performance and business confidence. The Central London vacancy for the second quarter was 9.49% down from 9.83% the previous quarter and 11.6% at the end of quarter two 2004.
The City market continues to show improvement beyond most expectations and although its vacancy rate of 11.34% is higher than the West End's at less than 7%, it has dropped by over two percentage points from 13.7% this time last year. The drop since last quarter has been more modest, down from 11.74%.
Over 1.1 million sq ft of City office space was leased in Q2 including Deloitte & Touche's 200,000 sq ft pre-letting in New Street Square, EC4. The level of Grade A supply therefore continues to fall from 67% of the total space last year to 59% in Q2 this year. Furthermore, there is 1.3 million sq.ft of space under offer, a large percentage of which is expected to complete in Q3 2005. This, combined with stronger forecast jobs growth in the financial services sector, is likely to stimulate the start of speculative office developments.
Bill Peach, chairman of C&W/H&B's City office said: "Lloyds TSB withdrawing from 30 Gresham Street and RBS pullling out of Aldgate Union subdued the City market in early 2004. That they are now both committing to new space has generated renewed optimism. There are also a number of new enquiries for space over 50,000 sq ft. On present conditions the market should have a big finish to 2005, similar to the climax in Q4 2004 but with a more sustained recovery in 2006."
Take-up of office space in the West End totalled only 406,445 sq ft in Q2 down from 531,452 sq ft in Q1. Guy Taylor, head of West End agency, C&W/H&B said: "This decline was partly because many government departments and public bodies were no longer signing up for office space in the capital owing to the drive to relocate civil servants outside London. With lettings to Google, Hammerson and the Icelandic Kaupthing Bank in the pipeline however occupiers are paying better rents for larger amounts of space. Also the current and predicted lack of supply should contribute to a supply led recovery next year and maybe even some pre-lets."